Perspectives and Progress on 2012 Farm Bill Reauthorization

1. Minnesota-Wisconsin Dairy Policy ConferenceEau Claire, WIApril 3, 2012Steve EtkaMidwest Dairy Coalition Perspectives and Progress on 2012 Farm Bill Reauthorization

2. Role of Midwest Dairy Coalition • Since creation in 1990, role of the Midwest Dairy Coalition has been to advocate for the unique perspective of Upper Midwest Dairy, and particularly dairy farmers, in Washington DC. • Coalition’s membership includes nearly 11,000 dairy farms, roughly 20% of nation’s dairy farms. 56% of all WI dairy farms, and 65% of all MN dairy farms.

3. What makes the “Upper Midwest” Dairy Perspective So Unique? • Predominantly focused on manufactured dairy products. Over 90 percent of the milk we produce in the UMW goes in the cheese, butter and powder. • Policies that degrade the value of manufacturing milk hurt our farmers and our manufacturers.

4. Dairy Policy Must Address Needs of Majority of UMW Dairy Farmers • Consistently, Midwest Dairy Coalition has underscored the point that for dairy policy to make sense, it must address the needs of the family dairy farmers. • Nationally, and even within the Upper Midwest, dairy farms come in all shapes and sizes.

5. Policy Should Focus on Needs of Farmers, Not Volume of Production • Must respect needs of all scales of operations. • But we also must not lose sight of the fact that about 88% of all dairy farms in the nation milk 200 cows or fewer. • 3% of dairy farms have herds over 1000 cows, but produce 50% of the nation’s milk. • Need to Focus on Farmers First, and Volume Second

7. What’s Going on With Current Farm Bill? • So that brings us to the current Farm Bill debate • Current Farm Bill expires at the end of September of this year • Late last year, there was a trial run at doing a Farm Bill, as part of the ill-fated deficit reduction “Super Committee” process

8. Super Committee Process was a “Trial Run” at the Farm Bill • Even though the “Super Committee” process fell apart last year, the Farm Bill package is reported to have included a fully negotiated dairy package, which has still not been made public. • The Peterson bill, based on the National Milk Producers Federation “Foundation for the Future” plan, has been the starting point of the dairy negotiations.

9. Peterson Bill Good Starting Point… • Some good aspects to the NMPF/ Peterson plan • The dairy reforms proposed are in reaction to the extremely low margins for dairy farmers in 2009. • Widespread view that existing dairy safety net programs (price support and MILC) were not sufficient to deal with severity of 2009 situation.

10. … But Changes Needed to Address Our Farmers’ Concerns • Midwest Dairy Coalition members had a number of concerns about Peterson bill: • Federal Order Reform Provisions Expanded Current Bias Against Manufacturing Milk • Safety Net was not sufficient to Address Needs of Most Midwest Dairy produce • Held two Member fly-ins to DC (2010 and 2011) to urge changes to bill to address concerns

11. MILC Has Been Important Safety Net for Upper Midwest • Without the MILC program, 2009 would have been far worse. • Provided nearly $800 million in assistance in FY 2009 alone nationwide. • And for WI alone, MILC has provided $670 million in assistance to our dairy farmers since its inception in 2002.

13. The Peterson bill would eliminate: • price support and MILC programs, • Replace with Margin Protection Program • focus on margin between milk price and feed costs. • Requires participating farmers to also agree to growth management provisions when margins fall below $6

15. Unlike MILC, new program requires producers to pay premiums to get sufficient coverage. • Stephenson analysis shows that over 2-year period (2011-12), would not make sense for farmers to participate unless they bought up to $6.50 margin coverage level. • This is a significant shift in the concept of a dairy safety net. Will take time for folks to adjust to new approach.

16. MDC Proposed Lower Premiums to Encourage Producers to Buy Up • Midwest Dairy Coalition has argued for lower premiums for the first 4 million pounds of production • Would be more affordable for all farmers to buy adequate coverage, but particularly for small and medium scale dairy farms, transitioning from MILC. • The 2-tier premium concept has strong support from UMW and NE delegations

17. Dairy Package Includes Changes Requested by MDC • Congressman Peterson and Senator Stabenow have indicated support for our 2-tier premium proposal. • 2-Tier concept is reported to be part of dairy package that has been negotiated so far. • Troublesome Federal Order provisions from original Peterson bill are also out.

18. Farm Bill Process in High Gear for Rest of 2012 • Senate planning Committee mark up of Farm Bill by end of April and Senate floor action before Memorial Day. Will cut $23 billion from ag and nutrition programs over 10 yrs. • House to take action by April 27th to meet House budget mandate of $33 billion in ag. and nutrition program cuts. But process will be for show, since Senate will oppose cut levels. • House likely to follow Senate lead on Farm Bill

19. If Farm Bill process bogs down, Dairy in Vulnerable Position • The current Farm Bill expires on Sept 30th • But the MILC will revert to a lower level of support starting on Sept 1st. • If Congress fails to pass new Farm Bill in time, there may be push for one-year extension. • But 1-year extension of reduced dairy safety net not acceptable. Milk prices and margins will come down, and we must be prepared. • Dairy package can and should be passed, even if the rest of Farm bill is not ready.